KARACHI: The State Bank of Pakistan (SBP) Tuesday asked commercial, microfinance banks (MFBs) and development financial institutions (DFIs) to provide relief to the borrowers in both the agriculture and small and medium enterprises (SME) sectors.
It plans to introduce a concessional financing scheme, for up to Rs 10 billion to be disbursed in 78 flood-affected districts of the country, identified by the National Disaster Management Authority (NDMA).
The State Bank took the measure in line with the government’s policy for the revival of agriculture activities and its relief measures for improving access to finance in the flood-stricken areas of Sindh, Khyber Pakhtoonkhwa, Balochistan, Gilgit Baltistan, Azad Jammu and Kashmir and Punjab.
“It has been decided to launch a concessional financing scheme through banks for agriculture production and working capital for farmers and SMEs, respectively, in districts affected by recent floods,” stated a circular issued by the SBP, made available to Pakistan Today.
The State Bank has stated that the aim of the programme is to provide affordable and concessional mark-up rates, ranging from 5.0 to 8.0 percent per annum to those who are most in need.
“Refinance under the scheme shall be provided to the banks at 5.0 percent. The banks shall be permitted to charge a maximum spread of 3.0 percent per annum from the borrowers, therefore credit to SMEs and farmers will be available at 8.0 percent per annum,” the central bank clarified.
The State Bank made it clear to the banks and DFIs that the scheme would be implemented under existing prudential regulations (PRs) for MFBs, agriculture and SME financing, pertaining to the recovery of lent money.
The central bank asked banks, MFBs and DFIs to defer all such loans and advances to the agriculture and SME sectors in flood-affected areas till December 31, 2011.
“This relaxation is available for loans and advances which are non-performing since July 1, 2010 in the affected areas,” the SBP indicated.
The banks were asked to provide farm credit to all categories of farmers in line with their respective lending policies and also arrange the insurance of their loans provided under the scheme.
Crop loan insurance is mandatory for five major crop groups, namely, wheat, rice, cotton, sugarcane and maize; especially to reduce the risk of losses due to the unpredictable natural calamities.
Standard procedure entails that crop production loans and repayment of the principle amount on the cropping cycle is for the maximum period of one year.
The central bank has left the limit of the borrowing to the discretion of individual banks which can be determined in accordance with the banks’ credit requirements, cash flows, repayment capacity and the risk profile of the borrower.
Approving short-term (one-year) loans to the SMEs, the SBP said the banks should lend to the enterprises keeping in view their working capital requirements.
According to the SBP, in case a borrower defaults on the credited amount, the banks would be entitled to charge normal rate of mark-up on such overdue principle amount, besides taking other actions to recover the amount.
For the loans to SMEs, the mark-up would be paid on a quarterly basis, while that of the agri loans would be paid on half-yearly basis, the bank said.
The scheme is to come into effect immediately and would remain valid only up to October 31, 2011. “However, outstanding refinance shall be recovered on the maturity of respective loans,” the SBP said.
The NDMA has identified some 78 flood-affected districts, some 24 in Khyber Pakhtoonkhwah, 17 in Sindh, 12 in Baluchistan, 11 in Punjab, 7 in AJK and the same in Gilgit Baltistan, for the implementation of the financing scheme.
List of flood-hit districts
PUNJAB
Mianwali
Layyah
Bakhar
Khushab
Muzaffargrah
Rajanpur
Rahim Yar Khan
Dera Ghazi Khan
Multan
Sargodha
Jhang
Azad Jamu Kashmir
Hattian Bala
Neelum
Bhimber
Poonch
Haveli (Kahuta)
Bagh
Muzaffarabad
SINDH
Ghotki
Sukkur
Khairpur
Naushero Feroz
Shaheed Banazirabad
Jacobabad
Kashmore
Kandhkot
Larkana
Shikarpur
Kumbar Shahdadkot
Kumber
Dadu
Jamshoro
Matiari
Tando M Khan
Hyderabad
Thatta
Tando Allah Yar
Peshawar
KHYBER PAKHTUNKHWA
Kohat
Karak
Lakki Marwat
Bannu
Charsadda
Mardan
Nowshera
Swabi
Malakand Agency
Mingora, Swat
Upper Dir
Lower Dir
Buner
Shangla
Batagram
Kohistan
Manshera
Chitral
Dera Ismail Khan
Haripur
Hangu
Abbattabad
Tank
BALOCHISTAN
Jaferabad
Nasirabad
Jhal Magsi
Sibi
Hernai
Kohlu
Barkhan
Loralai
Musa Khel
Killa Saifullah
Kech
Sherani
GILGIT BALTISTAN
Astore
Diamir
Ghanche
Gilgit
Gizer
Skardu
Hunzanagar
